South Korea’s economy escapes a new recession for 2023

South Korea’s economy narrowly avoided recession in the first quarter of 2023, new economic data reveals, after shrinking in the fourth quarter of last year.

The South Korean Central Bank reported that during the first quarter of this year, the economy grew by 0.3 per cent compared with the last quarter of last year, which recorded a quarterly contraction of 0.4 per cent. An economy is technically in recession if it records a contraction of two consecutive quarters.

South Korea’s Yonhap news agency noted that Asia’s fourth largest economy grew annually at 0.8 per cent during the first quarter, after growing at 1.3 per cent per year during the previous quarter. Annual growth was due to relatively good export performance and improved domestic demand, while the pace of economic growth is expected to slow during the current year as a whole with weak exports.

The country’s exports have fallen year-on-year since October last year amid strong monetary tightening by major economies to curb inflation, and it is the first time since 2020 that exports have fallen for six consecutive months.

Private spending is also likely to be affected by higher interest rates 2022, following the Central Bank of Korea’s implementation of seven consecutive increases in borrowing costs since April last year. But the central bank froze its key interest rate at 3.5 per cent for the second consecutive time earlier this month, as inflation appears to be falling and fears grow about an economic slowdown.